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The Paycheck Protection Program and small business performance: Evidence from craft breweries

Author

Listed:
  • Aaron J. Staples

    (Department of Agricultural, Food, and Resource Economics at Michigan State University)

  • Thomas P. Krumel

    (Department of Agricultural Economics at North Dakota State University)

Abstract

The Paycheck Protection Program (PPP) provided approximately US $790 billion in COVID-19 relief funds to small businesses across the United States. This study merges a verified industry dataset of craft beer producers with government microdata on PPP loan recipients to examine the relationship between PPP funding and small business performance during the pandemic. Results indicate that firms receiving PPP funding were more likely to remain in operation and experience a smaller decline in annual production. However, even within a single industry, COVID-19 had heterogeneous effects on different market segments, demonstrating the importance of a firm’s pre-pandemic business model on its flexibility and resiliency during a crisis. Finally, using a quasi-experiment that exploits a natural break in the loan program, the study suggests a positive causal effect of the role of loan approval timing on short-run performance outcomes. These findings provide evidence that the PPP alleviated some losses induced by COVID-19, but questions remain about the program’s distribution and long-term impacts. Plain English Summary The US federal government created the Paycheck Protection Program (PPP) to minimize the economic damages from COVID-19 on workers and small businesses. One industry hit particularly hard by the pandemic was the craft brewing industry, making it an ideal industry to explore whether the PPP achieved its objectives. The results show that receiving a PPP loan increased the likelihood of remaining in business through the pandemic. Additionally, while most craft breweries experienced a decline in annual production from 2019 to 2020, firms that received a PPP loan experienced a smaller reduction. Breweries that received the earliest funding also performed better, suggesting that loan timing played a key role in performance outcomes. Taken together, the study suggests that the government program helped reduce economic damages associated with COVID-19, but more work is needed to fully understand the program’s impact.

Suggested Citation

  • Aaron J. Staples & Thomas P. Krumel, 2023. "The Paycheck Protection Program and small business performance: Evidence from craft breweries," Small Business Economics, Springer, vol. 61(3), pages 931-956, October.
    • Handle: RePEc:kap:sbusec:v:61:y:2023:i:3:d:10.1007_s11187-022-00717-3
    DOI: 10.1007/s11187-022-00717-3
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    Cited by:

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    3. Stefano Filomeni & Francesca Querci, 2025. "Did Biden-Harris’s reforms on the Paycheck Protection Program reduce racial disparities in lending?," Review of Quantitative Finance and Accounting, Springer, vol. 64(4), pages 1783-1808, May.

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    JEL classification:

    • H12 - Public Economics - - Structure and Scope of Government - - - Crisis Management
    • L66 - Industrial Organization - - Industry Studies: Manufacturing - - - Food; Beverages; Cosmetics; Tobacco
    • L88 - Industrial Organization - - Industry Studies: Services - - - Government Policy

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